Haier Case Study

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4- Buyer Bargaining Power: LOW/MEDIUM

There are many rivals which are well-known and producing quality products in the business and the clients can switch from one to another easily. On the other hand,it seems that the clients are fine with the higher prices for Haier products taking into account the quality products.

5-Rivalry: HIGH

In international markets, there are giants like Samsung, LG, Electrolux.It would be very difficult for Haier to exist and gain market share in the international markets. Locally, there is also a high competition while most of the manufacturers are decreasing prices to capture market share.

Entering the Turkish Market:

Pros:

- A population of 77 mio with 28.8 mio labor force.

- Dynamic young population. %50

- A remarkable economic growth over the past decade with an average annual GDP growth rate of 5.1%

- World’s 17th largest , Europe’s 6th largest economy as of 2013

- High expectations of growth in the coming years: OECD expectation is an annual average growth rate of 5.2%.

- An all time high figure of 8716$ in terms of GDP per capita figure is reached by 2013.

- Low household indebtness : Only 22% of GDP.

- Home Ownership : Low and new home sales are strong

Cons:

1-Regulators taking macroprudential measures to curb current account deficit. In that respect; lots of new measures are introduced recently.

- To curb retail loan growth

- To decrease credit card lending growth by banning installements from credit cards for particular sectors.

- To decrease the demand for foreign goods through higher import-tax.

2- Two very strong domestic brands backed by big conglomerates ; Arcelik and Beko

3- Low quality image associated with Chinese goods & products

4- Foreign brands like Bosch, Samsung are already in the market. Their distribution channels are wide-spread. Their products can be reached easily.

Turkey’s Home Appliance Industry:

In 2013, the Turkish home appliance sector market grew by 6% compared to last year. Arcelik has a market share of over 50% in home appliances ,air conditioners and around 30% in LCD TV’s in 2013. The second player in the market is Vestel which is famous with its LCD TV’s.

Recommendation for the BOD of Haier:

As an emerging promising market, Turkey is expected to overperform most of the countries in the world in the coming years in terms of growth. As this is directly linked to the incomes of households, Turkey can be seen as a very good potential for most of the global brands. On the other hand, in some business areas, it may be difficult to enter and be successful in the market.

Particularly for the Haier Case;

- Arcelik and Vestel are very well known and famous brands in Turkey. Besides, almost all foreign prominent players like Bosch, Samsung, LG are already existing in the market. Therefore entering this market with a new brand will be difficult.

- As stated above, there are high import taxes that are charged for the imported goods from Turkish Government to curb the Current Account Deficit of the country which increases the cost of the products..

- There is also generally accepted low quality image for Chinese goods and products.

All in all, when we evaluate all these;

- At the end of the day, whatever the case Turkey is a promising market and with its young generation, consumption levels shouldn’t be undervalued in Turkey. Therefore Haier should enter the market. But taking into account the market conditions, I would propose two ways for this.

- Joint Venture with a prominent company: like Haier did in the previos market entrances.So that they will be able to see the demand, learn about the market and then evaluate if it will be feasible to enter the market independently. Haier is an expert in examining the client’s needs (finding a niche market) and manufacturing products that will meet their needs. After learning the Turkish consumer’s behaviors, preferences, needs, they can start operating independently.The Haier brand is not known at all in Turkey therefore they should start to work for brand recognition at first.Like they did in other countries, they should hire local expert people which knows the Turkish consumers habits.Lastly but not least, they should have large distribution channels or agree with big technology markets like Bimeks, Teknosa,Media Markt, Darty. Selling their products in these big technology markets will create an improvement in the brand recognition.

- Another thing is that construction sector is one of the most important factors behind growth in Turkey. When you buy a house,some durable goods like the dishwasher, oven are included in the apartment you buy. Haier could make an agreement with construction companies like Agaoglu or Torunlar ..etc. in an aim to provide Haier products as amenities in their newly built housings, helping to reach middle and upper middle class families of Turkey effectively. Afterwards, they will be able to test the reaction from the customers and decide how to carry on in the market.

- Entering Turkey will not have a good impact at first stage on the sustainability of Haier’s competitive advantage.Because;

- They don’t know the specifications of Turkish market, Turkish consumers.

- Their local staff will be definitely more costly than their stuff in China.

- There will be a lack of brand awareness in Turkey.

- The excellent after-sale service will not be available as they will need to agree with several contractors.

- As a forward integrated company, Haier has its own logistics but in Turkey it will have to establish one or have it done by another company.